Global investment strategist Edward Yardeni, during his interview on CNBC’s "Trading Nation," linked the current market trends to the dot-com boom in 1999.
Yardeni expects the market to melt-up — a scenario that pumps up the performance of an investment due to the influx of a huge number of investors driven by the fear of missing out.
What Happened: In the discussion, Yardeni said that “the Nasdaq from late 1998 to early 2000 went up over 200%. Now, we’re up almost 100%, and we may very well be on that same track.”
Although the president of Yardeni Research isn't overly-alarmed by the events, he does hold a cautious perspective. Yardeni has a positive opinion that the economy would recover with the availability of COVID-19 vaccines and changes in the fiscal and monetary policies, reports CNBC.
Why Does It Matter: In the last one year, the NASDAQ composite rallied close to 42% and recorded a 4% gain in the first week of 2021. Bitcoin on the other hand has shot upwards by over 325% in the past one year and close to 18% from the start of 2021.
Yardeni is expecting a federal push through quantitative easing and estimates a low-interest rate in the first six months of the Biden administration. And with the vaccine distribution gaining momentum, he predicts that the second half of the year could be more stable. However, the strategist does not rule potential inflation risks stemming from higher demand and significant monetary stimulus.
“This market keeps stampeding ahead of my forecasts. I hope we get to 4,300, my S&P 500 [year-end] target, in a leisurely fashion,” Yardeni said but adding that everything he currently sees "points to a melt-up"
The investment strategist explicitly said that while he is more comfortable analyzing securities — with cash flow, dividends, or earnings — than digital currencies, it isn't hard for anyone who looks at Bitcoin's (BTC) chart to be able to tell that "it’s certainly a sign of exuberance, of speculative excess.”
Yardeni said he hoped the market would prove his melt-up theory wrong because typically ends in meltdowns.
Price Action: BTC was last seen quoting $33,701.80 on Sunday.
Photo by Eva K. on Wikimedia
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